Protecting assets arising from a Road Accident Fund or medical-negligence claim

AMANDA VISSER: The proper protection of assets following a successful claim against the Road Accident Fund – or for medical negligence – is quite important since the amounts involved are substantial. A court ruling last year shed light on several important aspects relating to these claims.

I’m Amanda Visser, and with me is Penelope du Plessis, vice-chairperson of Fisa, the Fiduciary Institute of Southern Africa, to tell us about the ruling and the management of these claims. Penelope, can you give us [some] background to the case, please?

PENELOPE DU PLESSIS: Hi. Yes, Amanda. The Chief Master of the High Court proposed that in matters where the claimants are minors, or fully or even partially incapable of managing their own affairs, a curator bonis should be appointed and the use of trust vehicles should be avoided.

The Master noted that the office is experiencing great difficulty in the implementation of court orders that are ambiguous.

The court orders aimed at establishing trusts, but confused the powers extended to the Master with those of the Administration of Estates Act – which does not regulate trusts – and those under the Trust Property Control Act.

The second issue raised by the Master was that the legal profession was circumventing the checks and balances afforded to the Master under the Administration of Estates Act by establishing trusts rather than appointing a curator bonis. The Master felt that ‘they’ do not have sufficient powers to prevent the abuse of these trusts and the trustees could set their own fees. The Master went further and stated that the use of a trust to protect damages awards would have a detrimental effect by diminishing the protection of vulnerable victims or beneficiaries.

AMANDA VISSER: And what was the final judgment?

PENELOPE DU PLESSIS: Judge Raylene Keightley ruled that the Trust Property Control Act in fact awarded the Master sufficient powers to regulate trusts and trustees.

She further stated that court orders must treat each case differently, and the court must make the final ruling [as to whether] a trust is to be used or a curator bonis is to be appointed.

The powers of the trustees are to be made clear in the court order. Remuneration and all administration costs must be set out explicitly and comprehensively in the court order.

She further noted that the trustees be appointed as per the Trust Property Control Act, and the court should not make any reference to the Administration of Estates Act. It was made clear that the Administration of Estates Act makes provision for remuneration of a curator bonis, and this does not apply to the trustees and should not be incorporated in any court orders.

AMANDA VISSER: And your opinion of the judgment?

PENELOPE DU PLESSIS: I feel a trust does work better for the beneficiary, as the trustee has more flexibility, and powers are set out in the trust deed. The trustees can, in their fiduciary capacity, look at how to invest the funds, and distribute the funds ensuring that the beneficiary is not prejudiced.

However, I feel when appointing a trustee, the court needs to look at the trustee’s credibility, experience in the industry, and experience in the administration of court-ordered trusts, as these are managed very differently from all other trusts.

The court should further look at whether a trustee is a member of Fisa, as they follow the code of conduct of Fisa, and I suggest that the trustee hold an FPSA^® designation.

AMANDA VISSER: What is that?

PENELOPE DU PLESSIS: That is a Fiduciary Practitioner of South Africa^® designation.

AMANDA VISSER: Okay, thank you. And can you please tell us just how these claims arise in the first place?

PENELOPE DU PLESSIS: I’m going to split them up into two categories.

The first is the tax on the Road Accident Fund, the RAF. This is when a claimant is in an accident and it’s not his fault. He’s injured and puts a claim in to the Road Accident Fund, and this is usually because he doesn’t have the same earning capacity as before the accident. The claim is made up of two parts – the ‘general damages’ and then ‘future loss of income’.

The medical negligence claim is a bit different. It’s normally when somebody goes to hospital, usually a mom to give birth, and something goes wrong in the process and the baby is born with a disability – usually cerebral palsy. A claim is then put into the MEC of Health, and this claim has three parts – ‘general damages’, ‘loss of future income’ and ‘future medical needs’.

Once the claim is successful, the courts will make the award to the plaintiff. This is usually a large sum of money and the court suggests that the funds be protected. This does not mean that claimants cannot manage their own affairs. However, the court will find it necessary to protect the funds so that they are utilised for the purpose of the award – either for future income or for future medical care.

AMANDA VISSER: There seem to be two main approaches in terms of managing the money once the claims are successful – either through the appointment of a curator bonis, or to hold the interest in a trust. Please explain the difference.

PENELOPE DU PLESSIS: Amanda, both of these are registered with the Master of the High Court. A curator bonis is a legal representative appointed by the court to manage the finances, property or estate of another person unable to do so because of a mental or physical incapacity. A curator’s powers are very limited and a curator will need to apply to the Master for permission to pay out funds, to determine a monthly income, and even how to invest the funds. This can be an administrative nightmare for the curator, who is relying on the master’s office for final approval of all requests.

The Master will also only approve investment in a secured guaranteed instrument, such as a fixed deposit. These investments can yield relatively low interest rates and do not make provision for capital growth.

Lastly, it needs to be noted that the curator bonis tariff has remained unchanged since 1991. The remuneration is 6% per annum on the income earned from the assets and the curatorship.

However, the assets in the trust will vest in the trustees in their role as the trustees. The trustee will hold office in a fiduciary capacity, and the trust is governed by the Trust Property Control Act. The trustees are obliged to exercise active care, diligence, and skill – which may reasonably be expected of a person who manages the affairs of another.

The trustees are given their powers in the trust deed, which allows a trustee to be flexible and act in the best interests of the beneficiary.

A trustee’s remuneration can also be fixed in the trust deed. However, the Master may be called on to fix remuneration as per Section 22 of the Trust Property Control Act.

AMANDA VISSER: Thank you for unpacking a very complex process. That was Penelope du Plessis, vice-chairperson of Fisa.

Brought to you by the Fiduciary Institute of Southern Africa (Fisa).

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